Q2 liner results highest ever recorded in history of transportation

Sep, 05, 2022 Posted by Gabriel Malheiros

Week 202237

Q2 results for global liner shipping have surpassed what has ever been reported by any company in the historically low margin transportation sector, according to a new report from container veteran John McCown, who heads up Blue Alpha Capital.

Comparing liners to the FANG quartet – namely tech giants Facebook, Amazon, Netflix and Google – also highlights the rarified atmosphere container shipping has entered over the past year.

Container shipping industry profits were 14% higher than total FANG profits in Q4 last year, 103% higher than FANG profits in Q1, and 145% higher in Q2. Moreover, the container shipping industry’s net income to revenue margin of 46.1% in Q2 was four times the overall FANG margin and still almost twice as much if low margin Amazon is excluded.

Contract rates remain massively elevated and are the reason McCown is forecasting liner shipping will make a cumulative net profit of $244.9bn for the full year of 2022, a remarkable 65.2% improvement over 2021’s record results.

However, many other analysts are voicing caution about liner prospects. The demand-led spikes seen during the pandemic that propelled container shipping to record earnings are now a thing of the past, according to recent analysis from Copenhagen-based Sea-Intelligence.

Sea-Intelligence has run the numbers on supply and demand during the covid era, and its conclusions add to the growing consensus that volumes are slipping, and it is only supply chain chaos such as port congestion that is helping prop up rates.

Global demand was consistently at a level 10% higher than capacity, from November 2020 to January 2022, according to Sea-Intelligence.

However, the gap has been narrowing, and the most recent data from June, shows a gap down to 2% versus the pre-pandemic levels.

The Shanghai Containerised Freight Index (SCFI) spot box freight rate index stood at 2,848 points on September 2, down 10% week-on-week and now down 44% on the peak at the start of 2022, albeit still more than three times the 2019 average. Rates on the Shanghai-US west coast route fell by more than 20% week-on-week to $3,959 per feu.

While long-term box freight rates continue to climb they are finally showing signs of coming under pressure.

Data from online platform Xeneta shows that long-term rates increased 4.1% in August, standing 121.2% higher than this time last year.

Nevertheless, there are signs that new long-term contracted rates are actually starting to drop on key trading corridors. However, due to the fact they’re replacing expiring agreements with considerably lower rates, the average paid by all shippers is still climbing.

Source: Splash247

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